Archive for the ‘civic finance’ category

This land is your land, this land is my land…This land is made for you and me. — Woody Guthrie

The concept of public land goes back so far that it is practically racial memory. The history of many peoples has been the war over open common land vs. privately held lands. Even today there are wars in some locations (e.g., Africa) between herders and farmers. Perhaps the best documented case of a transition from publicly held to privately held land, enclosure, is in England. Enclosure led to wealth for those who held the land, and forced many laborers into cities where they formed the basis of the Industrial Revolution. In this country, the great expanses of land “liberated” from the indigenous peoples who treated them as a common birthright made land ownership available to many common people via the Homestead Act. Property ownership is still one of the best predictors of wealth accumulation and a great majority of people still hope to own their “little bit of heaven”. But despite this drive, we tend to see public land as ours, held in common. In other words, it is our land, to be used for our benefit.

Public Land in Ann Arbor, Defined

Probably the greatest cause of civic strife in Ann Arbor over the years has been the dispute over public land. What is it? First, it is owned by a public entity, whether that is the public schools (but not a charter school), the University of Michigan, or an authority such as the Ann Arbor Transportation Authority. But when owned by the City of Ann Arbor, – that is when many of us feel ownership.

Public Land is a zoning category and is shown on maps as PL. As defined, “This district is designed to classify publicly owned uses and land and permit the normal principal and incidental uses required to carry out governmental functions and services.”

It has 10 “permitted uses”.It seems clear that the authors of this classification were thinking about parks right off the top. Note that sentence in the first use about structures that are not incidental to the use of the land? The first three items are about parks and open space. Most of the others are about obvious governmental functions, though item (f) might raise some questions. The PL designation is restrictive and creates a barrier to development.

Zoning for two important blocks along William St. Dark red is D1, burnt umber is D2.

Public ownership does not mean PL zoning. For example, none of the public parking lots in the downtown are PL. They are all zoned D1 (core downtown) or D2 (edge). (The Ann Arbor GIS system contains a very detailed zoning map.)

Two of the most hotly disputed public land holdings in Ann Arbor, the old Y lot and the Library Lot, have never been zoned PL. Note that the Ann Arbor District Library and the Blake Transit Center (and Post Office) are all PL, as is Liberty Plaza. This means that those parcels could not be developed unless they are rezoned, but no such obstacle exists for the two former parking lots.

Proper Uses of Public Land

So regardless of zoning, what is the proper use of land owned by a public entity? One hopes that it is for a civic purpose, that is, a purpose that will enhance the condition of the civic body, its residents, its businesses, and its private property owners (taxpayers).

And how do we define that civic purpose? That is the job of the policymakers (City Council and certain boards and authorities). We have many policy priorities in the City of Ann Arbor, well recognized and discussed over years. They include environmental objectives such as energy conservation, management of storm water, and conservation of open space; enhancement of business activities (especially in regard to downtown properties), and attention to zoning and planning dictates. Another objective that has become more and more urgent is the provision of affordable housing, both in the sense of subsidized housing for the most vulnerable populations and in so-called “workforce” housing for moderate-income (60%- 100% or sometimes even 120% of median annual wage) people. And for downtown parcels, parking for automobiles is still desired, though often criticized.

But wait – there is another objective. Land in Ann Arbor has become so valuable that it is a resource ripe for extraction. One can actually mine money from it, especially if it is in or near downtown. Given the perennial structural deficit that the City often runs, and the ambitions of the Council majority (and now, our very forward-looking City Administrator), it is irresistible to look for a cash return as well. The downtown parcels are actually pots of money just sitting there unrealized.

Given the value of downtown parcels, it is a temptation for Council to try to attain all their policy goals and at the same time realize a cash return. This inevitably sets them up for some awkward gymnastics. Developers may wish to develop downtown, but they also insist on making a profit. It is called “Return On Investment”. After all, developing parcels and negotiating with politicians is a lot of work.

Another complication is that there has been a fluctuating policy in which sale of city property was designated to be deposited in the City Affordable Housing Trust Fund. The history was well reviewed in the Ann Arbor Chronicle. This policy puts a moral and political pressure on the Council to obtain a cash return on the property. But obtaining cash and also the type of development that they want is truly challenging.

Let’s Do an RFP

The most direct and effective way for Council to obtain policy goals and also a reasonable financial objective is to execute a Request for Proposals. Typically these invite proposals from developers to fit some predetermined criteria and also invite them to offer their best price. Also typically, there need to be some guidelines for how the proposals will be reviewed and the City is always free to refuse all offers. (This actually happened in the case of 415 W. Washington, where an RFP issued in 2008 attracted relatively few bidders, and none of the proposals met the standards of the Council.)

The history of RFPs, as used by the Ann Arbor City Council to dispose of public land, is rather sad. The first RFP issued for this purpose in recent history was for affordable housing on the lot recently vacated by the old YMCA (we now know this as the old Y lot). The logic and history behind that RFP were described in an article for the Ann Arbor Observer (the actual published version was edited for length and content but this is the most complete version). We told some of the story here of the William Street Station, the project that won the bid but was killed within a week of being finalized.

Another RFP was issued ostensibly to find an appropriate developer for the Library Lot, the former parking lot next to the Ann Arbor District Library. That story is told here and in many posts about the long struggle over the Valiant proposal to develop a hotel and conference center. (See the page Library Lot Conference Center for a list of posts.) Ultimately, the Council terminated the RFP and made no awards. Instead, it directed the DDA to take another look, with the evident intention that there should be a comprehensive downtown planning process. The beginning of this “look” is told here, and the end was the Connecting William Street project, in which the DDA sought to convince us that every surface lot should be built to its highest possible density. That report was never taken up by Council, though the Planning Commission, under the leadership of Kirk Westphal, placed the report on a list of “resources”.

With these successes behind it, the Council sought to make things simpler. Both the Y lot and the Library Lot were simply placed with a broker and put up for sale. But neither Council nor the Ann Arbor public could quite shake the notion that public land should be sold only with some public benefits attached to the deal. (We reviewed both the history of the Library Lot and its importance in Ann Arbor’s culture and concept of ourself in our post, Core Space and the Soul of Ann Arbor.) Thus, both of these sales became mired in court cases.

But that is a story for later.

NOTE: The “Council majority” referred to here is the Taylor caucus (the “Powers That Be“) that has existed for some years, in succession to the Hieftje caucus. A minority of Council members (the “Neighborhoods“) have opposed many of the policy directions and substantive decisions. However, the recent primary has apparently changed those ratios. See The Primary Struggle for the Future of Ann Arbor for details.

UPDATE: The fate of our downtown public lands is being hotly debated (October 2018). The immediate cause is Proposal A on the November ballot, which would reserve the Library Lot for use as a public park. This is in direct contradiction with the intent of Mayor Christopher Taylor and allies to have Core Spaces develop the lot. There is a pending court case regarding some hasty contract signing without the approval of Council, in apparent violation of our Charter. (Here is an account published by the Ann Arbor News.)

Meanwhile, the fur is flying as both sides present their case for the ballot issue. As this account by the News explains, a group has formed to fight the ballot issue and persuade Ann Arbor citizens not to vote for the proposal. Unfortunately, some of the assertions by this group border (in my view) on untruths and certainly push the boundaries of polite discourse. Recently Mayor Taylor himself has made an open plea to voters which contains hefty doses of hyperbole.

Mary Hathaway, one of the leading lights for the Library Lot park struggle, has responded with a lengthy letter refuting many of Taylor’s points. She admonishes him for the negative tone of his message and asks where the cheery positive person that she remembers has gone. And she addresses directly the financial bind the City Council has made for itself, with both the Y lot and the Library Lot in play, and the evident intent to use proceeds from one sale to pay the expenses of re-acquiring the other.

The stakes are indeed high, both monetarily and in terms of credibility of the Mayor, who recently won re-election over a strong opponent (Jack Eaton) but who also lost many of his Council allies. The fate of the ballot issue will tell us much about the future direction of Ann Arbor, since it likely breaks down so neatly along the fault lines that divide us.

Postcard sent to voters before Nov. 2017 election. (Click for full size)

In November 2017 Washtenaw County voters approved a new county property tax millage by nearly a two-to-one margin (see report in the Ann Arbor News). Starting this December (2018) the County will collect a 1-mill tax ostensibly intended to support both County mental health and County public safety operations (i.e., the Sheriff). But for some municipalities who have their own police forces, part of the tax is to be returned to them to use in any way they choose.(We discussed this in detail in Hair on Fire In Ann Arbor.)

The Ann Arbor City Council majority passed a resolution in July 2017 designating their preferences, which leaned strongly toward using the cash for climate change initiatives. In August, the City Administrator Howard Lazarus issued a memorandum to detail exactly how those funds would be allocated. It indicated that proceeds from the millage would be divided so that 20% would go to pedestrian safety, 40% to affordable housing, and 40% for climate change. In the March 12, 2018 budget presentation, these expenditures were further mapped out.

But some citizens are saying “Not so fast”. At the March meeting, as reported by the Ann Arbor News, several citizens complained that they supported the millage in order to support mental health efforts. Their feelings could not have been assuaged much by the indication that part of the money will go to support two staff positions (saving the General Fund some money). Money is fungible, folks. And there is every indication that the use of this money is going to be a campaign issue. Already both the 5th Ward Council challenger, Ali Ramlawi, and Jack Eaton, who is running against Mayor Christopher Taylor, have said that they disagreed with the proposed use of the funds, which they each said should go to mental health. (Eaton is also emphasizing crime prevention.)

Taylor and his caucus argue that Council has been perfectly clear all along about the use of the “rebate” from the millage and that citizens who voted for it understood that the purposes encompassed more than mental health and public safety. But a new citizens’ group begs to differ. Citizens for Mental Health & Public Safety (CMHPS) has issued a press releasein which they request some rethinking of this special windfall. They support the millage issue itself and don’t quarrel with the election results. But they want a refocus, to mental health. Specifically, to drop the climate change allocation and use that money for mental health purposes. From the press release:

CMHPS members urge the City Council to include the following new actions in its planning and budgeting decisions to remedy this omission.. First, Council members should appropriate 40 percent of current and future revenues from the millage to mental health services. Second, Council members should appoint an advisory group of experts to identify best practices for improved mental health services and related public safety services in time to inform the biennial budget process for fiscal years 2020 and 2021.

And to that argument that the public already knew what they were voting for, CMHPS proceeded ahead of time to gather data. They had a professional polling organization conduct a telephone poll. (I received the poll and can report from my own experience that it was not a push poll but seemed to be entirely objectively conducted.) The poll results support their contention that many of the public voting did not understand that part of the millage proceeds would be diverted into other Ann Arbor-specific objectives. When asked what the priority for spending the money would be, 56% answered “mental health services”. When asked whether the information that a different use of the cash would have influenced their vote, 45% said it would have made them less likely to support it.

From the findings of the survey conducted by Public Policy Polling April 2-3, 2018

So how did this disconnect occur? The answer doubtless lies with the way local news is not very well transmitted in Ann Arbor now. We have a very intermittent local newspaper, which most people read online, if at all. City Council deliberations and results are followed by a tiny fraction of the electorate. In this case, probably most people got their information from the campaign material sent out by postcard. You’ll note that the website itself only mentions mental health in its title. It is obvious why many voters had the impression that this was a mental health millage and why they didn’t understand that millions of dollars would be diverted to climate change and other inside-Ann Arbor-purposes.

From the postcard.

In an interview, Glenn Nelson, a leader in this effort to redirect Ann Arbor’s “rebate”, stressed that his group still supports the County millage. (And a majority of the taxes collected will go to the purposes stated.) They simply want the money redirected to Ann Arbor used to address mental health and safety issues. Thus they are fine with pedestrian safety and affordable housing (which often is addressed to serving supportive housing in Ann Arbor; this serves mentally needy clients). But they want the focus to return to mental health for the remainder of the proceeds.

The Council is in the midst of budget discussions. These generally conclude mid-May. We might suppose that some mention of this issue will come up with this year (FY2019) budget, though Lazarus said not in his memo of last summer. Meanwhile, we have electoral campaigns to conduct. The discussion will continue.

The Washtenaw County Board of Commissioners had a big win on November 7. The somewhat controversial ballot issue for a combined mental health and public safety millage passed rather spectacularly. As related by the Ann Arbor News, it won by nearly a 2-1 margin.

We also noted in Taxes and the Local Government Quandary that a change in language at the last minute made this into a vehicle to distribute taxes on some municipalities to others. The purported reasoning behind the rebate was to acknowledge that municipalities who tax themselves for their own police forces were being taxed twice. The idea, then, would be to repay them according to their tax base (ad valorem). But this was altered to make the payment on the basis of population. According to the report in the Ann Arbor News, the device was invented by CM Chuck Warpehoski and Commissioner Conan Smith. The intent and effect was to transfer additional funds to the City of Ypsilanti, presumably in an effort to provide “equity”. (Ypsilanti is perennially revenue-short.)

My concern was that all this complication might cause the millage to fail at the ballot box. But that fear was not realized. The voters, at least those in the eastern more urbanized section of the County, endorsed it heartily. In spite of two groups opposing the millage, the win was more than its supporters had imagined. As quoted by the Ann Arbor News,

“Tonight, the people of Washtenaw County recognized the need to adequately fund mental health and public safety,” County Board Chairman Andy LaBarre, D-Ann Arbor, said in a statement after the results were reported.

Regional Issues

Distribution of votes for and against the millage proposal, as shown by Washtenaw County. Note that most townships in the western part of the County voted No.

But there are some regional implications in any County-wide vote. With their heavy voter numbers, the cities of Ann Arbor and Ypsilanti, and Ypsilanti Township, can often carry a measure. This can create a classic urban-rural split, where the townships that don’t use services intensively may resist being taxed to provide them to others. As we noted earlier, many of these rural townships keep their own operating millages to a bare minimum. The fact that much of the land being taxed is agricultural probably adds an edge to this. If you are operating a business that requires tens or hundreds of acres, each tax increment is a direct hit on your livelihood.

There was another indication at the BOC meeting that there might be some regional strains. According to the Ann Arbor News, the vote was only 5-4 in favor to put this on the ballot. Evidently only the Ann Arbor commissioners, together with the representatives from Northfield and Pittsfield Townships (both are relatively urban and will receive a rebate), voted for it. Even the Ypsilanti commissioners did not support it, nor did the commissioners from the western townships.

This raises a common question in governance: is winning the question by majority rule the only consideration? When is it more important to accomplish a goal regardless of opposition by a substantial minority and when is it instead important to reach a consensus? Should we be concerned when such a geographical divide exists on a particular issue? Is it worthwhile to try to find an approach which will at least not lead to a revolt as this one has? These questions are at the heart of the question of what regional governance should mean. In my opinion, it is better to avoid cultivating a deep well of resentment between localities. It should never be a “I win, you lose”.

Legal Questions

From the beginning, there have been those who questioned the legality of this ballot measure.

Former County Commissioner Dan Smith circulated a message prior to the election with a number of reasons that the measure could fail a legal test (Smith is not an attorney). These are his points, verbatim.

Michigan law states that a millage proposal must state a “purpose,” which is something like constructing a new building or paying for police/fire protection. I don’t think that allocating funds to jurisdictions which maintain their own police force is a “purpose.”

Local government can only spend taxpayer funds on things which are authorized (or fairly implied) by state law. There is no provision for the county to simply give money to another municipality (or anyone else, for that matter).

The “refund provision” results in non-uniform taxation as those municipalities w/o a police department are paying a higher tax rate than those which get the refund; this also violates current interpretations of “equal protection” in both the U.S. and Michigan constitutions.

The refund provision also violates Article IX Section 6 of the Michigan constitution as those municipalities WITH a police department are experiencing a tax increase (the amount of the refund) without the qualified voters of JUST that municipality voting on it.

Similarly, this could be an end-run around Charter tax limits, Ypsilanti (and maybe others) is already levying the maximum under its charter.

To all who questioned these points, BOC Chair Andy LaBarre assured the public that the Corporation Counsel, Curtis Hedger, had not only reviewed the measure, but had consulted an expert in ballot language. (The Corporation Counsel advises the BOC and the County Administrator, but does not communicate directly with the public.)

WEMU interviewed Harley Rider, the Supervisor of Dexter Township, who announced that he would be part of a coalition who will challenge the ballot measure in court. When we reached Rider today, he stressed that he is joining what he expects to be a “bi-partisan” coalition as a private individual, not in his role as a township official. He says that there is not yet a formal, named group but it is obvious that the process is full of energy.

This is not the first time the County has been sued over a tax issue. While the matter was never completely resolved, a previous suit did not prevail. The County had levied a tax without a vote of the people in 2015 and 2016. As the Washtenaw County Road Commission notes, that tax made it possible to improve many county roads, but its legality was questionable. The BOC dropped that idea after they were sued and put an issue on the ballot in November 2016, when it passed handily. They were also moved to drop the “Act 88 millage” which was similarly imposed using a somewhat novel theory. (Ann Arbor News report) It seems that some commissioners just can’t quite leave alone venturing into deep waters as far as taxation is concerned.

NOTE: Of course, we do not know how any court case will be resolved, nor has an argument been set forth by the parties. This account is not intended to prejudge the result and it will likely be months before we know more. But it would have been desirable to avoid this conflict. The County needed a “win-win”.

UPDATE: Harley Rider responded (December 17, 2017) to an inquiry about progress on the lawsuit with a statement that was explicitly for quotation. “We are trying to schedule a meeting with an attorney shortly after the first of the year.”

SECOND UPDATE: (March 14, 2018): Some people are beginning to realize that Ann Arbor is not using the millage for mental health, as was supposed by many voters. As was reported by the Ann Arbor News, City Council got an earful from several commenters. The intention to bring a lawsuit by Harley Rider is also referenced.

The Fuller Road Station has been one of the dominant stories in Ann Arbor politics for most of the last decade. It blends two major influences: former Mayor John Hieftje’s preoccupation with rail travel, and the University of Michigan’s growth plans and need for parking. And, as a theme not invited by the powerful, Ann Arbor’s love of its parks.

Rail

As we recounted in our post Ann Arbor’s Fading Dream of Trains and Rail Systems, it all began with John Hieftje’s Mayor’s Model for Mobility (2006). Most elements of that model were included in the expansive transportation plan (the AATPU) passed by Council on May 4, 2009. The plan (which still informs Ann Arbor transportation decisions) calls for signature routes, now the location of a proposed light rail line (the Connector). They run through a nexus at Fuller Road. Note the little blue train station icon. Under “mid-term recommendations” (5-10 years) it lists Construct permanent station at Fuller/Maiden intersection for Ann Arbor to Detroit Commuter Rail/AMTRAK service ($10,000,000) as one of its objectives.

Signature routes from the 2009 AATPU. (Click for larger image.)

Parking

From the beginning, the UM has been engaged with the City of Ann Arbor over the University’s growing population and its need both for increased transit and for parking. As noted in this useful timeline from the Ann Arbor Chronicle, the UM first proposed to build a parking structure on Wall Street. At a meeting held in January 2009, the idea of a multimodal transit center combined with parking for the UM (initially called FIT, or Fuller Intermodal Transit) was first floated by Eli Cooper, the City’s transportation specialist. The Chronicle’s account of this meeting is worth reading for insights on how the City and UM interact. The UM was persuaded to abandon the parking structure on Wall Street and invest its planning and its cash in the Fuller Road location instead.

The background information in the May resolution stresses the interest of the UM. (Emphasis added.)

Work began on developing the plan update in April 2007. The planning effort was guided by a technical steering committee comprised of city and stakeholder agency transportation and planning staff. The University of Michigancontributed $20,000 to the planning effort and also contributed information about current and future travel patterns related to University growth plans.

To emphasize the point, a Letter (August 17, 2009) to City Administrator Roger Fraser from Hank Baier, UM VP for Facilities and Operations contained this information (emphasis added):

“As the conceptual plan for FIT is advancing, city and university staff will continue their efforts to more fully define next steps in anticipation that each of us will approve the conceptual plan in October. That schedule is necessary if we are to reach agreement on a first phase of construction that would accommodate university parking by 2012.”

Also on August 17, 2009, City Council passed a resolution awarding a contract to JJR LLC for Phase I engineering services for FIT, at a cost of $541,717. (Emphasis added.)

“The City owns the land containing the existing southern surface parking lot along Fuller Roadand has determined that this area is: uniquely suited as adjacent to the existing Amtrak passenger rail service corridor, which is proposed to accommodate commuter rail service linking Ann Arbor to Metro airport and Detroit and has been designated as a national high-speed corridor betweenDetroit and Chicago; immediately adjacent to the University Medical center campus withthousands of employees and visitors daily; able to provide direct pedestrian access to jobs andmedical services;accessible to bus transport via Fuller and East Medical Center Drive and isalong a proposed signature transit corridor identified in the City’s recent Transportation Plan Update.”

To finalize the concept, on November 5, 2009, Council adopted the Memorandum of Understanding with the UM to construct the Fuller Road Station. It also increases the project budget to $111,228. The MOU states that UM will pay 78% of the cost. Phase I will consist in part of a structure with 900 parking spots.

So, in a deft slight of hand, the City has put the Mayor’s vision close to a first realization, while reaching an agreement which will obligate the UM to pay for most of the first phase. But there was a weak spot. The City may have “owned the land”, but that land was a park.

Parks

With the accession of Roger Fraser as City Administrator, the City was casting its eyes on Ann Arbor’s extensive parks system as a possible source of needed funds. There were actually lists of parks that might be sold. But the parks loyalty of the Ann Arbor public should not be dismissed lightly. In November 2008 the voters had approved (by 81.21%) a ballot issue that requires the City to ask for voter approval prior to selling any park land.

Shall Section 14.3(b) of the Ann Arbor City Charter be amended to require voter approval for the sale of any land within the City purchased, acquired or used for park land, while retaining the Sections current requirement for voter approval of the sale of any park land that is designated as park land in the City of Ann Arbor Master Plan at the time of the proposed sale?

Early signs of trouble for the Fuller Road Station (FRS) included a push-back at the Park Advisory Commission (PAC). After a subsequent visit to PAC by Mayor Hieftje and several efforts at revision of a resolution, a resolution merely calling for “transparency” (to quote the Ann Arbor Chronicle) was passed, but not until hearing a great deal of intense public comment. All this discussion was in consideration of the allowable uses for park land, which is where PAC had some voice. This was addressed by Council simply by changing the rules: on July 6, 2010, City Council changed the zoning codes so that PL (public land) may be used for “transportation uses”; but again, as reported by the Chronicle, not without a great deal of passionate public comment.

Federal Funds

Note that at the time the Fuller Road Station was first proposed, no Federal funding was in hand. It was simply a joint project between the City of Ann Arbor and the University of Michigan, and the UM promised to pay the bulk of the initial cost. (Which basically would have been the parking structure.) But things were looking up. President Obama, as part of his stimulus package (American Recovery and Reinvestment Act), proposed the High Speed Intercity Passenger Rail program (HSIPR). The Michigan Department of Transportation (MDOT) assisted communities, including Ann Arbor, in making application (due date was April 4, 2011). Ann Arbor applied for a grant to design a rail station at Fuller. In May 2011, Eli Cooper was rather giddily announcing that the City had a $2.8 million grant for that purpose. It would be through the auspices of the Federal Railroad Administration (FRA).

Wait, That’s a Park.

An unexpected obstacle materialized just as the cheers rose. The Huron Valley Chapter of the Sierra Club had been following the development of a parking structure and train station in Fuller Park with dismay. They had a tool. Because of the National Environmental Policy Act (NEPA), an Environmental Assessment (EA) is required. And the result has to be a Finding of No Significant Impact (FONSI) (to the environment). But wait – remember, this site is in a PARK. That means that Section 4(f) comes into play. Here it is, straight from the Federal Register. (Emphasis added.) It unequivocally states that park land has certain protections.

(f) ‘‘4(f)-Protected Properties’’ are any publicly-owned land of a public park, recreation area, or wildlife and waterfowl refuge of national, State or local significance or any land of an historic site of national, State, or local significance (as determined by the Federal, State, or local officials having jurisdiction over the park, area, refuge, or site) within the meaning of section 4(f) of the DOT Act (49 U.S.C. 303(c)).

(g) ‘‘4(f)Determination’’ is a report which must be prepared prior to the Administrator’s approval of any FRA action which requires the use of any4(f)-protected properties. This report documents both the supporting analysis and the finding required by section 4(f) of the DOT Act (49 U.S.C. 303(c)), that (1) there is no prudent and feasible alternative to the use of such land, and (2) the proposed FRA action includes all possible planning to minimize harm to the park, recreational area, wildlife and waterfowl refuge, or historic site resulting from the use.”

In less than a month after MDOT submitted the City of Ann Arbor’s grant request, the Chair of the HVC-Sierra Club, Nancy Shiffler, sent a letter to the director of the HSPIR project. The letter points out, with some asperity, that the property is a park.

Time Passes

Suddenly, things slowed down and there were few announcements. In July 2011 Mayor Hieftje sent constituents a letter assuring us that all was well, and the UM would “pay almost all upfront costs for Phase I”. In October 2011, UM spokesman Jim Kosteva sent an anxious email to the City (Hieftje and City Administrator Steve Powers) with a reminder that time was of the essence. “The U is hearing from and feeling the pressure of the 18,000 folks who work in and around the medical center as they are severely squeezed in their search for parking.”

Still, there were no more announcements. In January 2012, the HVC-Sierra Club issued a press release.

What’s Ahead for Fuller Road Station? It’s Time for the City to Let the Rest of Us in on the Plans.

It is time for the city administration to stop playing shell games, for the city council to force a full
disclosure of what the plans are for the Fuller Park site, and for the city council to follow the mandate of
City Charter Section 14.3(b), which requires a vote of Ann Arbor electors for the sale of any part of City
property acquired for parkland uses, regardless of what any temporary current parkland use may be.

The Sierra Club and a newly formed group, People for Ann Arbor Parks (now Protect A2 Parks) reported the results of a FOIA in which they discovered speculation about also developing the Fuller Road area for commercial purposes.

For all those months, we didn’t know how the different sites proposed fared. Under the FRA’s guidance, the City was obliged to examine all possible site. The reason? Because this site was in a park. That is where the “prudent and feasible alternative” comes in. They were obligated to show that this was the best, or perhaps the only, choice. So months were spent in analyzing several different possibilities. One of the more intriguing notes was that the FRA required the consultants to consider the possibility of using the old Michigan Central Railroad Depot building (now in use by the Gandy Dancer restaurant). How did that come up? Notice the reference to a historic site in Section 4(f)?

A caution: there are a lot of things in this bulk of material to argue about. Do we think Fuller or Depot is better for our downtown? Can we afford it? When do we think a commuter rail will actually materialize? But actually these are all immaterial to the Environmental Assessment. Here are the questions:

Does the plan cause damage to the park asset? Not just to the current temporary parking lot but to the entirety of Fuller Park? How well will a major Ann Arbor park co-exist with a busy parking garage and train station? In other words, do we agree with a Finding of No Significant Impact?

Even if we agree that some damage will occur, is Fuller still the only choice? In other words, is there really No Prudent and Feasible Alternative?

Got vision? Our City Councilmembers do. But that takes money. Can we talk taxes?

Why do people run for office in local government? Various reasons, including personal (political) ambition, an enjoyment of politics as a practice (it has its obsessive qualities and you meet people), sometimes useful connections that might help you in your day job. But I believe that a common characteristic in budding politicians is that they want to DO SOMETHING. The aspirational impulse may go many directions. With me it was land use. (So, immediately, all the BOC of my day was able to deal with was homelessness.) We have local politicians who have emphasized economic development, transit, and development for population density. Lately, the attention has turned to economic equity and affordable (i.e., subsidized) housing, and now there is a strong interest rising in solar power as a method of attacking climate change.

The Michigan Difference

It is frustrating, from the viewpoint of a Michigan municipal official, to read about advances in other states. Here a transit program, there a measure to provide affordable housing, often paid for by a special sales tax, hotel tax, or even ticket surcharge (think UM football games) levied by a city or a county. Not here. There are only two ways a local government in Michigan can tax its residents and businesses. One is a tax on real property (real estate) and “personal property” which despite the confusing name is really business property. However, that tax is slowly being eliminated.

The other option (available only to cities) is a city income tax.According to the Ann Arbor News, the City Council is considering that again. If the Council decides to go ahead with this oft-considered option, they will have to put a charter amendment on the ballot. If the tax is enacted, it will mean that City residents will pay a 1% tax on income (this is rents and retail proceeds as well as wages) and non-residents will pay 0.5%. In return, property owners will not be obliged to pay the general operating millage (for FY2018, that is 6.0343 mills). Whether one comes off ahead on this personally depends on personal circumstances. (My best understanding is that retirement income is now taxable, so seniors are not as advantaged as in the past.) The advantage to the City, and perhaps to many taxpayers, is that we are able to tap the incomes of UM employees and others who live elsewhere and work or do business in Ann Arbor.

Because of limitations in the Michigan constitution, it is very difficult for local government to raise property taxes. We reviewed that in this post from 2011, which also walks you through details of when and how assessments for property tax are done. Because of the Headlee Amendment and some other constitutional restrictions, governments are limited as to the total millage they can impose and must go to a vote of the people (a ballot question) to raise a new millage. Tax expenditures become (by design) a zero-sum game. So local governments are always starved for revenue, especially if they are ambitious.

Invitation to a fundraiser that was posted to Facebook in July 2017

In the face of this frustration, some of our County Commissioners and City Councilmembers have gotten creative. As we described inHair on Fire in Ann Arbor, the BOC has established a millage ballot proposal that offers to give certain local governments a “rebate”, to be spent as wished. This has entered into Ann Arbor City Council politics, with the incumbents who sponsored the resolution that assigned these tax goodies to favored uses (pedestrian safety, affordable housing, and climate change) running for office as the “Sustainable Ann Arbor”, “Progressive” slate on the strength of that resolution. This device is obviously a response to frustration over the inability to use local tax dollars as they would like. But in my opinion, both the BOC and these Councilmembers are not just misusing the ballot initiative system, but are being insensitive to the way ordinary taxpayers view local taxes and how they are used. To be successful, they will have to persuade a majority of Washtenaw County voters that paying an additional 1.0 mill tax is to their benefit.

Taxes are Taxing

Ann Arbor homeowners are very conscious of our local tax system in July. This is the month the big property tax bill is due. To many of us, this is the make-or-break moment. Writing that check by the end of the month (and Ann Arbor has a very big stick to make sure that you do) is a big stress point. Of course, no one loves taxes, but this is your HOUSE. And every year, the total goes up.

Most of the property taxes we pay are for local government. Across the County, the actual rate and amount paid varies widely, especially because of overlapping school districts, library districts, transit authority district, and other authorities. The greatest difference is in the millage that each municipality imposes on its own behalf. That is the operating millage together with any special millages that voters have approved. These can be seen by referring to the Apportionment Report from the County Equalization Department. (All figures cited in this post are from County Equalization.) Washtenaw County is really the essential level of government in Michigan, because many programs based on Michigan and even Federal law are delegated to the County to enact (these are called mandated services). Taxpayers in all of our local units pay the same County millage (currently 6.2432).

Property taxes collected in Washtenaw County as shown in the Apportionment Report (2016). The smaller pie chart is County taxes and is detail of the pink wedge. Note that schools are the largest tax target. AAATA and DDAs are in the “local government” wedge.

Questions About Equity

There are several questions that occur to the taxpayer. One is, “what am I getting for this tax payment“? That depends. The general expectation for local taxes is that the tax is collected by government so that it can carry out the services we need. Washtenaw County has 27 cities, villages, and townships. Taxpayers in each of these may live in different school districts, library districts, etc. In some, voters have chosen a high-service, high-tax government. Many townships are run on a bare-bones model. So service levels differ, and so do local tax rates. City residents usually go with the high-cost option. When we want special services (parks, local buses, better roads, etc.) we vote in special millages. In some townships, it is very difficult to pass a library millage or an increase in the township general operating millage. Cities have a solid waste millage and provide trash pickup; most townships leave it up to the occupant to contract for trash removal. Cities typically have water utilities (sewer, drinking water). Townships mostly leave it up to occupants to have a well and a septic tank. There are exceptions; the more urban townships like Ypsilanti and Pittsfield contract with the Detroit water authority, and portions of Scio Township and Ann Arbor Township have contracts with the City of Ann Arbor. In general “you get what you pay for” is the rule. But to feel that you are taxed fairly, you want to see that you get the services you have opted for.

Is It Fair?

The wish to be treated fairly is baked into our bones. (Experiments with monkeys show they resent being treated less well than the next monkey; they’ll refuse to do the trick if the other monkey gets a grape and they only get a cucumber.) But part of that is your expectation of the “service” that you are buying. I want my trash picked up and my drinking water to be clean and readily available. I’m not fond of potholes either. But I also want to know that my community is being administered rationally and compassionately by officials who have the correct expertise. In the example of the County, I want to know that public health, environmental health, and mental health are all being tended to by people who know what they are doing, and public safety (policing and judicial system) is important to me even if I never get robbed or a ticket. So those are “services” I will happily purchase. I’ll vote for school taxes even though I never had children. But what really irritates me is if I do my part and others don’t. That is where we come down to the question of an even treatment of taxation.

Local Differences in Taxation

Because voters in local municipalities (that includes cities, villages, and townships) all choose different “packages” and also because the economic picture in each locality differs, there are major differences across the county in how much tax revenue is collected and what individual taxpayers have to pay. The fortunes of each government (and the burden on taxpayers) are determined by two different factors: the millage rate and the taxable value (properly called the ad-valorem) available. In order to keep local assessors from under-assessing the value of property, the County Equalization Department conducts a detailed study each year and publishes a complete snapshot of local government assessment and taxation. (All figures we cite here are from the Equalization Report or the Apportionment Report.) The fortunes of each government depend heavily on the ad-valorem (hence the constant attention to “tax base”).

Let’s stop right here and acknowledge that there are different kinds of taxpayers, including owners of agricultural, industrial, and commercial property. These are very important to a locality’s tax base but our discussion here focuses mostly on residential taxpayers. For the taxpayer, the assessed value (SEV) of their house is determined each year by the assessor (assumed to be half the market value), and the taxable value (TV) is determined by a complex formula (see Proposal A) that works to hold down TV for long-term property owners. For most, it is much lower than the SEV. The tax due is calculated in this way:

Some localities have such high-value property that they can afford to keep millage rates relatively low and still provide quality services. Others, with low real estate values, strain to cover all the bases with high millage rates. This creates a good deal of inequity on a social level across the county.

Tax profiles for three different municipalities. Local millages (including operating and special millages) are shown. Tax calculated on total homestead millage is for house of market value $200,000, assuming TV is exactly half that.

In this example, the owner of a new house of $200,000 market value (TV of $100,000) would pay a drastically different tax bill. Because it has such a low tax base, the City of Ypsilanti is taxing its residents at the very maximum that its charter allows. Because most real estate in Ypsilanti is often at a lower valuation, many may not pay that. However, this tax rate will obviously depress real estate value.

Back to the fairness question: presumably since each of us has chosen to live in a particular community (a free will theory of taxation), the tax assessed there is “fair”. But what about when the tax is being collected for services used by a different locality? As we explained in our post Regionalism Reconsidered, Michigan has a strong home-rule tradition and culture. When we pay County taxes, we are paying for a regional benefit. We must accept that services delivered to our entire region (county) are on our own behalf. But what few of us expect is that the County will collect taxes specifically to donate to a different municipality.

In the case of the proposed “mental health and public safety” millage, that was a decision made on the floor during debate on the ballot language. In the final language, a change was made so that the “rebate” to municipalities with their own police forces would be made proportionately on the basis of population, not on taxable value.

shall the limitations on the total amount of taxes which may be levied against taxable property within Washtenaw County, Michigan, as provided for by Section 6 of Article IX of the Michigan Constitution of 1963, be increased up to the amount of $1.00 per thousand dollars of taxable valuation (1.0 mills) for a period of eight years, beginning with the December 1, 2018 levy and extending through the 2025 levy, which shall raise in the first year an estimated $15,433,608.00 to be used as follows: 38% shall be allocated to Washtenaw County’s Community Mental Health Department for mental health crisis, stabilization and prevention, and to meet mental health needs in an appropriate setting, thus reducing the burden on the jail and improving care; 38% shall be allocated to the Washtenaw County Sheriff’s Office to ensure continued operations and increased collaboration with the mental health community; and 24% shall be allocated to jurisdictions in the County which maintain their own police force (currently Ann Arbor, Chelsea, Milan, Saline, Ypsilanti, Pittsfield Township and Northfield Township) in proportion to their respective 2016 population values?

(The change was made in order to benefit the City of Ypsilanti.) This has the effect of redistributing County taxes from one municipality to another. As is seen in the table, most other cities and townships are essentially donating their own tax base (accepting the logic that this is a repayment for local taxes already collected) to others. For the complete calculations, refer to this spreadsheet.

“Rebate” in first year based on taxable value vs. population.

But the tax is also a redistribution from all the other municipalities in the County to these units receiving a rebate. Recall that the more rural townships have chosen to tax themselves at very low rates and then offer very minimal services. For example, Bridgewater Township has a local millage rate of 0.8233. Freedom Township is 0.9501. The proposed new County millage of 1.0 mills is higher than they choose to tax themselves for all services. And part of that tax is going to be redistributed to the urban communities. This may be why (as reported by the Ann Arbor News) the vote to approve the millage was 5-4, with the “out-county” commissioners voting against it.

There was some discussion that this redistribution in favor of the City of Ypsilanti was for “equity” and that small city does indeed have its problems, as shown with the tax situation. Perhaps we need to consider what “equity” means in distributing taxes among County communities, especially if the purpose is not truly regional in nature. Should the farmers of Bridgewater Township be paying for pedestrian safety in Ann Arbor? Should Saline and Chelsea be donating tax receipts to Ypsilanti and Northfield Township? The rebates are not going to individual taxpayers in those different jurisdictions, but rather to their elected bodies, to spend on whatever priorities they determine. Is that fair?

The Muddle

County voters have shown that they are willing to pay taxes for a truly regional service. For example, in November 2016, the County roads millage passed by 70.94% and the millage to support indigent veterans passed by 73.18%. But because of this muddle, it will be hard to make the case that this is truly a regional service for parts of the County. Perhaps the votes in the urbanized parts of the County will be enough to pull it off. But I wish that the BOC had offered us a clean choice with two pared-down millages, one for mental health services and one for the Sheriff. It should have been possible to make a good regional case for each of those. This was a bad time to introduce political aims into the process.

Just to confuse things further, should the Ann Arbor City Council decide to place a ballot issue for a city income tax on the November ballot, Ann Arbor voters will be making two different decisions about their tax futures at the same time. Wonder how that will work out?

UPDATE: The Ann Arbor News has anarticle about the city income tax that compares the UM position (not our business) with that of MSU re an East Lansing income tax (oppose it, offering a buyout). According to the article, there will be a special work session of the City Council on September 11 to discuss the tax.

General note: I believe that it is probably too late to place a ballot item onto the November ballot. (I am having difficulty in finding the due dates for a charter amendment to be placed on the ballot by the Council.) That would indicate that the next opportunity for an election would be May 2018. After that, August or November 2018. There are potential political consequences for all these choices.

SECOND UPDATE: The City Council has now had a working session to discuss the possibility of a city income tax. Here is the account by the Ann Arbor News. Note that any appearance of this issue on the ballot will not be until after another study has been done, possibly November 2018. The slide show for council had some eye-opening figures, in the slide showing future capital needs. (The Treeline project is said to begin at a floor of $55 million.)

The leaders (movers, shakers, and Council majority) of Ann Arbor celebrate the notion of Ann Arbor exceptionalism. This evidently extends to invulnerability in times of uncertainty. While the nation and even the world wait to see what will unfold with the Trump presidency, we are ready to bet on future Federal dollars to achieve our dream of a new train station. On June 5, 2017, City Council will be asked to pay an additional $137,026 toward the new station. (The last vote was in January, to put money into a contingency fund for this purpose.) This money is intended to allow the City to collect the last part of a planning grant for a new station. Yet, it appears unlikely that Federal funds will be available for actual construction of a station. And even more significantly, the contracted work may not be finished in time to be reimbursed under the current grant.

A good summary of the situation was provided by Ryan Stanton, writing for MLive.com (Ann Arbor News). Stanton has been following this issue closely and earlier submitted a FOIA to see the document that the City sent to the Federal Railway Administration (FRA) for review. All in all, the City of Ann Arbor has qualified for an award in non-transparency with regard to this project. You may remember the famous picture of the email with all lines redacted. It has released no public documents about the project since September 2016. (All public documents are available on the City’s Ann Arbor Station page.)

Timeline on Ann Arbor City website for grant acceptance

But the project is running up against a brick wall. The grant funds expire (gone back to the Treasury) as of September 30, 2017 (end of FY 2017). The schedule published on the City web page indicates that the required public hearing and 30 day review of public comments was to take place in December 2016, with final approval of the EA in January. But the proposal has languished in some void between the FRA and the consultants. Now it appears increasingly difficult to fit in all the tasks needed before expiration of the grant funds. That would leave the City liable for all the costs that have been incurred since this phase of the work began.

As the City Administrator, Howard Lazarus, noted in a letter to Council members,

FRA has expressed some concern over the City’s ability to complete the work within the grant funding period. To that end, FRA has authorized a “tapered match” approach, in which the City can access the federal funds first. Staff believes under this structure, we can advance the majority of the PE effort before the end of July. Council should note that the FRA cannot guarantee that invoices sent to them after June 30th will be processed prior to their mid‐September cut‐off for FY17 funds disbursements.

Lazarus is asking Council to approve an amendment to the consultants’ contract that appears to extend their tasks beyond the original contract. One could speculate that some of this is to answer questions from the FRA in their response to the previous submission. There is a slight pleading quality to Lazarus’ letter to the FRA. (Note: full-size text may be viewed by clicking on these illustrations.)

From Howard Lazarus to FRA Midwest Regional Manager May 26, 2017

An odd note is that the project is not shown in the attached schedule to be completed until October 2017. How does that reconcile with a September 30 deadline, much less a June 30 deadline? Yet presumably the City would not pay the consultants in advance of their work. (The usual approach is that consultants issue invoices as work is done, and the City sends them to the FRA for reimbursement of the grant amount.) It appears that the City is proposing to make itself responsible for completion of the work past the grant deadline. All of this seems to be very creative accounting practice.

What’s the Problem?

We recently alluded to the history of former Mayor John Hieftje’s vision with reference to the grant that was awarded for the first phase of planning a new train station. Like most Federal grants from those golden days, this ARRA grant of $2.8 million (from the Obama stimulus of 2009) is for 80% of the cost – in this case, for the Environmental Assessment under NEPA, and some preliminary planning and engineering. It has been the expectation that a future grant for actual construction would follow that same 80% Federal – 20% local rule. But even 20% of a multimillion dollar building is a big bite for a small city. So originally, the promise from Mayor Hieftje was that the City would put in NO GENERAL FUNDS. Instead, the local match was to be picked up by the University of Michigan in a joint project, the Fuller Road Station. (Here is a post in which that promise was made explicitly). That deal fell apart and UM built a parking structure elsewhere. Ann Arbor had already expended a fair amount of money on early planning, but that work was not accepted as a local match toward the grant, so the money was essentially wasted and new cash from the General Fund had to be invested in order to stay in the running for the grant. The City has now spent over $1 million just in matching funds for the grant (most of this went to consultants and planners), though much more has been spent that doesn’t apply directly to that grant now. And now it could be liable for all the sum left (about $750,000), including the 80% Federal match.

Predicting the Future of a New Station

Much of the uncertainty has been in the Federal budget process itself. As we explained in some detail earlier, transportation funding is complex. Part of it is based on the Highway Trust Fund – a dedicated source of revenue. The rest is dependent on the dispensation of Congress, in money from the General Fund or from new sources of revenue. Much of that was hanging by a thread until recently because all Federal funds were dependent on passage of a continuing resolution – which happily was passed on April 28 and signed by the President. Here is a summary of transportation funding under that resolution. Note that some important items, namely TIGER grants and New Starts, that were to be eliminated according to the President, were saved in this extension.

Meanwhile, the President, or more accurately, the White House, presented Congress with an Executive Budget. As has always been true of Presidential budgets, this is more a policy document than an actual description of how money will finally be allocated. Only Congress gets to appropriate money. But it is important because it shows President Trump’s priorities and thinking. And those priorities do not include handing money out to little cities. Here is a revealing summary of the “Infrastructure Initiative”. From the summary:

The flexibility to use Federal dollars to pay for essentially local infrastructure projects has created an unhealthy dynamic in which State and local governments delay projects in the hope of receiving Federal funds. Overreliance on Federal grants and other Federal funding can create a strong disincentive for non-Federal revenue generation.

Instead, the White House would move to a model in which private investors would enter into partnership with states and local governments to build or improve projects that have a revenue generation capability. So – toll roads, transit prices high enough to pay a profit, fees for using anything. The Feds would simply facilitate all this. The idea is so potent that investment funds along these lines have already attracted Saudi investors.

Under the very best of scenarios, Congress will pass a budget for FY 2018, to begin October 1. All current funding will expire as of September 30. In the past few years, Congress has failed to pass a budget at all and instead has relied on a series of continuing resolutions, which generally hold most budgets where they began, with a few small changes. But let’s assume that they make it this time. (After all, one party controls both houses of Congress and the Presidency.) What are the chances that discretionary spending on transit will be included in the new budget, given the strong leanings by the White House and the tax-cutting mood of Congress?

A Double Gamble

So it appears that the City of Ann Arbor is placing bets on its cards for two outcomes:

That it can recoup all the grant monies for the current project, against a very tough timeline

That this will somehow result in the future in a new train station.

But it also appears that there is a mood of desperation at the possibility of having the effort collapse. From Lazarus’ letter to Council:

From Howard Lazarus to Ann Arbor City Council

Rather high-stakes cards, and to my risk-averse eyes not a good bet. Will Council raise, or fold?

As we related in the last post, Ann Arbor has been dreaming of trains for the last decade. We have paid for multiple studies, and detailed plans and reports have been produced. Our Mayor, Christopher Taylor, has named rail travel as a top priority. In a letter sent to many constituents early in January, he stated “Expanded rail service is vitally important to the future of Ann Arbor”. (Here are some further comments reported by the Ann Arbor News.) Now the City Council has just a couple of months before the next Budget is adopted. How much of the City’s resources should continue to be devoted to this purpose? After so many years with rail in the future, is it time to relegate these dreams to the past?

For Love of Trains

First of all, this question is not about whether we love trains. Of course we love trains. Most of us of any age or travel experience have happy memories to relate. (I have a sentimental description of my own experiences in this post from 2011.) Trains are part of the sensibility installed in us from childhood. Here is a video of a favorite childhood song about trains. Wouldn’t you like to climb aboard on this train, or at least join in?

Trains are a great mode of travel. Sit and read (or work) or just look at the scenery. No worries. Why wouldn’t we want to be able to travel to Detroit without worrying about freeway traffic and parking? And as a commute, it can’t be beat, especially if that “last mile” problem can be solved. (Transit from the station to work.) If you have visited a city with a light rail system, you know how nice it is to travel around an urban area that way. Just hop on, ride a few minutes, hop off.

For all these reasons, and for several others, the dream has survived since 2006 and has been enthusiastically adopted by many on our Council, and by many citizens. The rail projects have all been studied and are ready to be implemented, more or less. But is this possible? Most of all, can we afford this vision under the present circumstances?

A Very Expensive Wish List

Because consultants have been hired to do studies of our rail wish list, we have some rather good numbers now for how much these projects will cost. The costs for the Ann Arbor Train Station have been kept rather obscure through the Environmental Review process, as has much other information. A construction estimate was provided via a FOIA by Dave Askins (thanks to a direct response by Howard Lazarus, the City Administrator). A couple of feasibility studies have been completed for the Connector. The North-South Commuter Rail (aka WALLY) Feasibility Study has recently concluded; here is the Financial Analysis. The Ann Arbor-Detroit Commuter Rail was folded into the Regional Transit Authority and cost estimates were included in that plan (RMTP) .

From all of these studies, we can compile a total of the full cost of the rail wish list for Ann Arbor. Note that these figures are not the amount that the City expects to pay. The Connector, WALLY, and the Ann Arbor-Detroit Commuter Rail are all expected to be cooperative projects and other governmental entities are expected to contribute. (The Ann Arbor Station is an Ann Arbor project alone.) But in every case, the expectation has been that the main burden of the cost will be borne by the Federal Government. Often the statement has been made that 80% of the cost will be Federal, and the 20% local matching amount is partly offset in theory by the State of Michigan (MDOT).

Costs for these projects are of two types: Capital (original construction) and Operating (annual cost of operation and maintenance). Capital costs are a one-time investment, but operating costs are perennial.

Capital costs for four rail projects

Annual operating costs for three rail projects. It is assumed that Amtrak would continue to operate the train station. These are gross costs; offsets for fares and fees not subtracted.

Making Decisions about the City Budget

Most City expenditures are based on fairly accurate estimates, either for existing contracts or from well-fleshed out plans. Most budgeted items will be spent as described, with a fair certainty that the deliverable will be produced. There is never quite enough money for all the things we would like to achieve as a community.

The City Administrator, Howard Lazarus, has been making presentations to the Council in advance of the budget. Capital improvements are suggested for firehouses, streetlights, sidewalks, dams, and signals. The slide also showed the following amounts ($millions) for FY 2018 and FY 2019. The last column to the right is “FY 2020+”. Taken all together, the rail items constitute 43% of all capital improvements. These are General fund expenditures in the City Budget for the next couple of years.

From the slide of 2018 capital improvement costs. Figures at bottom include more items than shown here.

If Council is going to continue to use Ann Arbor city funds (taxes) to pursue these rail projects, it is making a calculated gamble. We are continuing to put chips on the table in hopes that there will be a big payoff. And the expectation has been that the deep pockets at the table belong to the Federal government. That is no longer true.

The Shifting Sands of Federal Funding

With the Trump presidency, predictions are impossible. One can, however, hear solid hints of what he is thinking. There are other players in Federal funding, especially many different factions and interests among members of Congress. Here are a few high points about Federal transportation funding, which has usually been very contentious.

The gold standard is outright grants. In other words, Federal taxes distributed directly to states and localities for use in transportation projects. This is what we would like for all our projects. There has been a move in recent years toward encouraging localities to apply for loans instead. The TIFIA program is an example.

Pennies were falling from heaven in 2009, with the Obama stimulus program, better known as the American Recovery and Reinvestment Act (ARRA). This was especially friendly to transit programs and included the high speed rail program (HSIPR) program that has paid for our preliminary rail station study. It was not renewed with the new Republican Congress in 2010. All ARRA grants expire at the end of the current fiscal year (September 2017).

The main source for transportation grants has been the Federal gas tax, or Highway Trust Fund. The tax rate has not increased since 1993. This fund was originally to pay for the Interstate system. A mass transit fund was added to it in 1982. The Transportation Act, which is the law that governs how the money is spent, has expired a number of times and been renewed and rewritten. This is always a big food fight in Congress. The way the money is allocated changes in each revision. There are always legislators who would like to get rid of the mass transit and alternative transportation provisions so more money can be spent on roads and bridges.

Through some miracle (and our Senator Debbie Stabenow deserves a lot of credit), the Transportation Act actually got revised and renewed in the last Congress. The name always changes. The last bill was MAP-21; this one is the FAST act.

An important feature of the Transportation Bill is that items funded by the Highway Trust Fund are not dependent on the Federal Budget because they are not part of the General Fund. This has kept funding of mass transit programs, for example, very stable.

The FAST Act included rail travel for the first time. BUT it did not attach Highway Trust Fund monies to it. RAIL IS DEPENDENT ON ALLOCATIONS IN THE FEDERAL BUDGET (the General Fund).

Congress has been keeping the Federal Government running by a series of continuing resolutions. It has not actually passed a budget for a long time. The current Continuing Resolution expires on April 28, 2017.

Meanwhile, President Trump and Congress are trying to conclude negotiations on a variety of bills and spending priorities. Here is the Budget Blueprint recently published by the White House.

Important Cuts and Immediate Significance

The two most important points affecting grants to local governments for rail in the White House blueprint are the cancellation of TIGER grants and the loss of New Start funding for new projects. TIGER has been a source of discretionary grants – very competitive (only 1 in 20 grant applications funded) but very essential to localities. That is the source that Ann Arbor hoped to tap for the new train station. New Starts have been the method of choice to start a new rail system “fixed guideway program” (which includes Bus Rapid Transit); this would have been the likely source of cash for the Connector or possibly one of the commuter rail systems. Without these, there is literally no Federal grant program that could realistically pay for our rail programs.

Even if Congress does not follow this blueprint, it must still appropriate funds for any grant program. With the Continuing Resolution due by April 28 and tax cuts looming on the horizon, this seems unlikely.

The Trillion-Dollar Question

What about the infrastructure program that President Trump has mentioned? It would not be grants, but rather tax incentives for private investment. The likely mechanism would be “P3” (Public-Private Partnerships) programs where the locality borrows money from private investors. A preliminary list of likely projects has been released, but has no force in law. Many such programs will require a source of revenue, such as fares, tolls, or fees.

ADDENDUM: The Administration’s likely approach is being telegraphed by Elaine Chao, the Transportation Secretary. In this speech she says,

“Investors say there is ample capital available, waiting to invest in infrastructure projects. So the problem is not money. It’s the delays caused by government permitting processes that hold up projects for years, even decades, making them risky investments. That’s why a critical part of the President’s infrastructure plan will include common-sense regulatory, administrative, organizational and policy changes that will encourage investment and speed project delivery.”

This is a clear call for privatized projects. What is not clear is what “impediments” are going to be cleared. Agreement by local governments? Safety regulations? Environmental hazards? Best not to picture this too fully.

The Gamble

Since it is so unlikely that there will be Federal grants to pay for the wish list of rail projects, what should the City Council do? One alternative would be to sit tight and wait for developments. But will they spend substantial funds in the next year on these projects, with all the other priorities? To do so seems to be a triumph of hope over prudence, indeed. Perhaps there is a good lottery running somewhere.